PRODUCTIVITY TECHNOLOGIES SERVICES INC., v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No.8 (For DCC) 111111111111111111111111111 11111 11111 11111111111111111111 1111111111 1111111111111 22-0 0 0259-0 0 75 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CTA CASE N0.10873 NOTICE OF RESOLUTION PRODUCTIVITY TECHNOLOGIES SERVICES INC., Petitioner, - versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. ALBERT C. ARPON ATTY. CARL FITRI HUSSIN ATTY. JOEL VINCENT D. SALAZAR Bureau oflntemal Revenue-Revenue Region 8A-Makati City 36th Floor, Export Bank Plaza Building Sen. Gil Puyat Avenue comer Chino Races Avenue Makati City DJCP LAW OFFICE Unit 1003, President Tower No. 81 Timog Avenue, South Triangle Diliman, Quezon City 1 103 GREETINGS: You are hereby notified by these presents that on July 11, 2025, a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, July 14, 2025.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION PRODUCTIVITY CTA CASE NO. 10873 TECHNOLOGIES SERVICES, INC., Members: Petitioner, DEL ROSARIO, P.J.) Chairperson, BACORRO-VILLENA, and - versus - CUI-DAVID, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. CUI-DAVID, J.: This resolves respondent's Motion for Reconsider' ation filed on April 3, 2025, without petitioner's comment, as confirmed by the Records Verification dated May 27, 2025. Respondent prays that the Court reinstate his Decision dated January 19, 2022, and order petitioner to pay deficiency income tax and value -adde d tax for taxable y ear (TY) 20 13 in the amount ofP143,339,041.19. To recall, the Court promulgated its Decision dated March 7, 2025 (assailed Decision) , which disposed of the case as follows: WHEREFORE, premises considered, the present Petition f or Re view is GRANTED . Accordingly , the Forma l Letter of Dem and , wit h Assessment Notices d a ted J a nuary 10, 201 7, th e Wa rrants of Distra int a nd /or Levy d a ted February 14, 2 0 20, a nd May 12 , 2022 , and the Wa rra n t of Garnishment dated May 12, 20 22, ar e CANCE LLE D a nd SET A SI D E. Furt h er, t h e Decision of responden t Commission er of Internal Revenue da ted J anu ary 19, 2 022, finding petitioner Productivity Technologie s

RESOLUTION CTA Case No . 10873 Productivity Technologies Services, Inc. v. Commissioner of Internal Revenue x------------------------------------------------------------------------------------------x Services, Inc. liable for deficien cy income tax and value-added tax in the amount ofP 143,339,041.19 for taxable year 20 13, is REVERSED and SET ASIDE. Consequently, respondent or any person acting on his behalf is ENJOINED and PROHIBITED from collecting the said amount from petitioner. SO ORDERED. In his Motion for Reconsideration, respondent contends that Revenue Officer (RO) Gilbert M. Bercasio (Bercasio) and Group Supervisor (GS) Melecio F. Cantara (Cantara) were authorized to examine petitioner's books of account forTY 2013 pursuant to a Letter of Authority (LOA) dated February 19, 2019. It further argues that their authority was ratified by the Bureau of Internal Revenue (BIR) Regional Director through the issuance of the Preliminary Assessment Notice (PAN) and the Final Assessment Notice/Formal Letter of Demand (FAN/FLD). Respondent's argument in his Motion for Reconsideration fails to persuade. As discussed in the assailed Decision, the issuance of a valid LOA is a jurisdictional requirement for the lawful conduct of a tax audit and the issuance of any resulting a~sessment. This requirement is firmly grounded in the Tax Code, as clarified by jurisprudence.1 In this case, no valid LOA existed at the time RO Bercasio and GS Cantara conducted the audit of petitioner's books for TY 2013. The earliest LOA on record, dated April 7 , 2015, authorized RO Villareal and GS San Juan, not Bercasio and Cantara. The latter officials proceeded with the audit without an LOA issued in their names. Instead, they relied on Memorandum of Assignment (MOA) No. 2016-438-00000289 ,2 an internal reassignment document signed by the Revenue District Officer, a subordinate official. The MOA does not satisfy the legal requirement for a valid LOA. The subsequent issuance of an LOA on February 19 , 2019, more than two years after the issuance of the PAN and the FAN/FLD, only confirms the absence of valid authority at the Republic v. Robiegie Corporation, G.R. No. 260261 , October 3, 2022 [Per J. Gaerlan, Third Division]; Commissioner ofInternal Revenue v. McDonald 's Philippines Realty Corp., G.R. No. 242670, May I0, 202 1 [Per J. J. Lopez, Third Division]. Docket - Vol. I, p. 33 1, Exhibit " P-6"; BIR Records, p. 11 9, Exhibit "R-6"; Docket - Vol. II, p. 606, JSFI, Stipulated Facts, par. 4.

RESOLUTION CTA Case No. 10873 Productivity Technologies Services, Inc. v. Commissioner of Internal Revenue x------------------------------------------------------------------------------------------x time of the audit and assessment. This LOA cannot retroactively validate the actions of RO Bercasio and GS Cantara. Respondent's claim that the issuance of the PAN and FAN/FLD ratified the authority of the ROs involved is untenable. As the Supreme Court categorically held in McDonald's: The practice of reassigning or transferring re;venue officers ... and subsequently substituting them with new revenue officers who do not have a separate LOA issued in their name, is in effect a usurpation of the statutory power of the CIR. The doctrine of ratification has no place in this context. Tax assessments, being administrative actions with potential penal consequences, must strictly comply with procedural due process requirements. The BIR's internal practice of relying on memoranda undermines the taxpayer's right to due process and violates BIR regulations, particularly Revenue Memorandum Order No. 43-90. Accordingly, the Court finds no merit in respondent's argument. The assessment is void, having been issued without authority. A void assessment bears no legal consequence and cannot be ratified or cured by subsequent acts. WHEREFORE, the Motion for Reconsideration is DENIED for lack of merit. SO ORDERED. LANM~VID Associate Justice WE CONCUR: Presiding Justice ON OfftCtAl BUSINESS JEAN MARIE A. BACORRO-VILLENA Associate Justice